Investment fraud case in US expands to 4 women from Israel

December 27, 2018 - 8:05 am

The Associated Press

GREENBELT, Md. (AP) — They followed a call script for reassuring investors: A broker boasted of winning up to 95 percent of his trades. Sales representatives promised a client she would be a millionaire within a year if she didn't withdraw her five-figure investment.

"If you win, I win," the broker told the woman, according to an FBI agent's affidavit.

Those were just some of the lies told to victims of a multimillion-dollar investment fraud scheme that has led to federal charges in Maryland against four women who worked for an Israel-based company, authorities say.

Yukom Communications employees pretended to be from other countries, lied about their professional qualifications and adopted "stage names," authorities say. They falsely guaranteed returns of up to 40 percent. And they didn't tell investors that the company handling their "binary options" trades only made money if its customers lost money, according to the FBI.

A federal trial had been scheduled to start in Maryland on Jan. 8 for Lee Elbaz, an Israeli citizen who served as CEO of Yukom, which provided sales and marketing services for internet-based businesses with the brand names BinaryBook and BigOption. But a judge agreed Dec. 18 to postpone her trial indefinitely. The judge allowed her defense attorneys from a New York law firm to withdraw from the case and be replaced, saying they had failed to properly prepare for trial.

Elbaz, 37, was indicted in March on three counts of wire fraud and one count of conspiracy to commit wire fraud. She was arrested in 2017 after traveling to New York.

Since then, federal prosecutors in Maryland have filed related charges against three other women who worked for Yukom. Shira Uzan and Liora Welles were charged earlier this month with conspiracy to commit wire fraud. The same charge was filed in November against another defendant, Lissa Mel.

Welles and Uzan, both of whom worked under Elbaz as sales representatives, pleaded guilty to the conspiracy charges during separate hearings recently and are scheduled to be sentenced in March. Welles and Uzan acknowledged that they were "directly responsible" for approximately $2.4 million and $1.8 million in investor losses, respectively, according to court filings.

Authorities believe the fraud scheme cost investors tens of millions of dollars. BinaryBook received customer deposits totaling nearly $99 million from the second quarter of 2014 through the fourth quarter of 2016 and returned just under $20 million to its clients during that period, according to records cited in the FBI agent's September 2017 affidavit.

An email instructed BinaryBook sales representatives to target retirees, Social Security recipients, pension holders and veterans as clients, according to a court filing. Elbaz's indictment says three victims were residents of Gaithersburg, Laurel and Annapolis, Maryland.

The scheme's victims also include Eugene and Penelope Timmons, of Kansas City, Missouri. They dipped into life savings to invest approximately $110,000 through BinaryBook over nearly two years. They lost everything.

"It was all a mess and a scam," said Eugene Timmons, 82.

The couple thought they were talking to experienced brokers in London. Penelope Timmons, 72, said BinaryBook's website initially created the illusion they were making money.

"We couldn't get our money out. All they kept doing was hand us off to other people," Penelope Timmons said. "Once you realize these people have taken you, it's very demoralizing and discouraging."

The binary options market largely operates outside the U.S. through unregulated websites. Its victims span the globe. In court papers, prosecutors said the payout on a binary option is usually linked to "whether the price of a particular asset_such as a stock or a commodity_would rise above or fall below a specified amount."

"Investors are effectively predicting whether its price will be above or below a certain amount at a certain time of the day, and when this option 'expires,' the option holder receives either a pre-determined amount of cash or nothing," they wrote.

In 2011, the FBI's Internet Crime Complaint Center received only four complaints from victims of binary options fraud, reporting losses of just over $20,000. In 2016, however, the center received hundreds of these complaints with millions of dollars in reported losses.

"This has been a worldwide problem," Justice Department prosecutor Ankush Khardori said during a September 2017 detention hearing for Elbaz, according to a transcript.

Defense attorney Jonathan Lopez, who represented Elbaz at that hearing, said his client worked for a legitimate business.

"They do a lot of things in this (FBI) complaint to make it (seem) like this is some Nigerian boiler room or some sort of lottery scam. That is none of these things," he said.

Elbaz and other co-workers made commissions based on the amounts of clients' deposits, not their profits, prosecutors say. Her indictment cites a September 2015 email from one employee to co-workers about a sales "marathon," a competition to obtain deposits from investors.

"This is not a cemetery here! It's a boiler room!" the employee wrote.